Warsaw, 24^th August 2020

 

Position of the Union of Entrepreneurs and Employers
on the draft act introducing the so-called Estonian CIT

 

On 12^th August 2020, the Government Legislation Centre published a draft law introducing the so-called Estonian CIT. According to the assumptions therein, beginning in 2021, certain capital companies that will allocate their earned profit for investments in their enterprises will not pay income tax. A similar system of corporate income taxation has been in place in Estonia for 20 years, hence its commonly adopted name.

The Union of Entrepreneurs and Employers believes that the introduction of the Estonian CIT generally promotes investment and the development of entrepreneurship. Moreover, this solution significantly reduces the reporting obligations of companies covered by it, which may lead to even eleven-fold reduction of time necessary to fulfil all obligations related to taxes. With this in mind, we conclude that the Estonian CIT is a step in the right direction.

It should be emphasised that, in accordance with the current version of the draft, the material scope of the act is narrowed down to entities that meet all of the following conditions:

• total annual revenues do not exceed PLN 50 million,
• more than 50% of revenues come from real business activities,
• average annual employment is at least 3 people who are not partners,
• they operate in the form of a limited liability company or joint stock company, the shareholders of which are only natural persons,
• they do not hold any shares in the capital of another company, participation titles in an investment fund or in a collective investment institution.

As we can read in the explanatory memorandum, the target group of the new regulations are companies from the SME sector, which have a high development potential and thus their growth may constitute an impulse for the development of the entire economy. The Ministry of Finance justifies the selection of this group of entrepreneurs referring to problems with access to financing for these entities. It seems that such a definition of the target group of recipients of the new solution is absolutely correct. Large companies already have a catalogue of tools enabling the reduction of CIT in connection with the investments made (e.g. IP-box). Therefore, it seems justified to designate a separate path to stimulate investment for representatives of small and medium-sized businesses running real economic activity (criterion of the source of income and average annual employment).

As emphasised by the representatives of the Ministry of Finance, by way of public consultations, it is possible to “loosen” certain restrictions limiting taxpayers’ access to Estonian CIT. Such declarations of readiness to continue working on the regulation should be appreciated. We believe that the group of entities covered by the new solution should be as wide as possible, which is why we count on the project’s evolution towards an even greater openness to business. One could consider, among other things, modification of the employment criterion so that all persons reported by the employer to social insurance were taken into account (a similar formula was used for the distribution of the Polish Development Fund’s “financial shield”), and not only those employed under an employment contract. In the long-term, it would also be possible to consider a solution enabling companies covered by Estonian CIT to develop through the acquisition of other companies – the draft in the current wording prevents Estonian CIT taxpayers from holding shares or stocks in the capital of another company.

Some doubts may arise when it comes to excluding limited joint-stock partnerships from the subjective scope of the draft act. In the justification, the Ministry of Finance motivates limiting the regulation only to limited liability companies and joint-stock companies with the same method of taxation of these entities in the classic CIT system and the need to develop consistent system assumptions as to the method of taxation and the amount of the tax burden in the lump sum system. The aforementioned argumentation seems convincing, but it would be worth reconsidering the possibility of extending the subjective scope of the new regulation also to limited joint-stock partnerships.

If the above conditions are met, the “Estonian” taxpayer will not pay income tax until the dividend is paid, i.e. until the profit remains with the company or is allocated to investments. On the practical side, taxpayers will be able to choose from two available options. Under the first one, they will stop paying monthly or quarterly advances and making annual settlements. As part of the second, they will pay the equivalent of CIT advances to a special account. Then these write-offs will be recognised as tax deductible costs. Then, as the Ministry of Finance assures, the same economic effect will be achieved as with maintaining classic CIT settlements.

Estonian CIT rates will be higher than the classic ones, yet the Ministry of Finance ensures that the effective tax rate for entrepreneurs who settle their taxes in the new system will be lower thanks to the new mechanism. As before, when the dividend is paid, entrepreneurs will pay CIT and PIT on the dividend. This is a significant difference to the Estonian model system, where there is no double taxation with respect to income generated by the company and then paid as dividends.

It should be remembered that in the classic CIT system, the company has to pay 19% or 9% in case of a small taxpayer. Moreover, the dividend is covered by a 19% PIT. Ultimately, the total tax rate is 26.29% for small and 34.39% for larger entities. Interestingly, in the Estonian system, the nominal CIT rate for larger taxpayers will increase to 25% for larger and 15% for smaller entities. The Estonian system also provides for a five percentage point reduction in the rate for entrepreneurs who meet additional investment requirements. Despite the higher rates, the Ministry of Finance assures that the new system includes a mechanism of deducting the amount of CIT from PIT from the dividend.

As a result, the effective tax rates after the changes are to be as follows:

• 25% for smaller entities or 20% in case an additional investment criterion is fulfilled instead of 26.29% in the classic system,
• 30% for normal taxpayers or 25% in case an additional investment criterion is fulfilled instead of the current 34.39%.

The difference in effective tax rates under the Estonian system indicates that the use of this settlement formula will ultimately result in actually lower taxation of the income generated by a company than in the “traditional” model. Therefore, the proposed system will be attractive to taxpayers both due to the postponement of the moment the tax obligation arises and due to the overall lower effective tax rate.

As we have mentioned earlier, a necessary condition for maintaining the preferential method of taxation is incurring certain outlays on investments. Taxation with Estonian CIT will cover the period of 4 years and will be automatically extended for the following years. If the required expenses are not incurred for investments, the entrepreneur will lose the right to “Estonian” taxation and will only be able to apply for it again after 3 years. In this regard, the possibility of modifying the planned regulation should be considered in such a way that a taxpayer who has lost the right to settle accounts in the amended CIT system could apply for it again at the beginning of the next tax year.

To sum up, we believe that the Estonian CIT is a necessary idea that might significantly support investments and development of entrepreneurship. The regulation in question is therefore a step in the right direction and ought to be evaluated positively.

24.08.2020 Position of the Union of Entrepreneurs and Employers on the draft act introducing the so-called Estonian CIT

 

Fot. loufre / pixabay.com

Warsaw, 19^th September 2020

 

Commentary of the Union of Entrepreneurs and Employers on Ursula von der Leyen’s State of the Union Address

 

The State of the Union Address touched upon key issues that will shape our reality in the years to come. The fact that the President of the European Commission, Ursula von der Leyen, noticed the problems of the internal market and proposed the creation of a new strategy for the Schengen Area, which will undoubtedly improve the quality of the regulatory environment for entrepreneurs, should be assessed positively. Nevertheless, the introduction of a European minimum wage or the excessively rapid increase in climate goals may adversely affect the condition of the Polish economy and the competitiveness of European industry. With this in mind, the Union of Entrepreneurs and Employers reminds that the improvement of the global position of the European Union will not take place without an increase in its economic importance.

On 16^th September 2020, the President of the European Commission, Ursula von der Leyen, delivered her first State of the Union Address, an annual speech to the European Parliament at the September plenary session. Without any doubt, the announcement of an increase in climate targets by 15 percentage points from 40% to 55% by 2030 drew the most attention. Still, the President in her address raised many important issues such as health, social rights, industry and the common market, and digitisation. Moreover, in her speech, the President raised important geopolitical issues, this commentary, however, will focus on issues related to the economy and the internal market.

The coronavirus pandemic and the resulting economic challenges have left their mark on the priorities of the European Commission (hereinafter referred to as “EC”). Madam President began her speech thanking the care workers, nurses, and doctors for their dedication, as well as all other workers who continued to perform their duties even when the lockdown was most severe. These events according to the President showed the great fragility of our society, but also the importance of humanity. Moreover, they constitute a new starting point for the European Union (hereinafter referred to as “EU”) whose task for the coming years is to rebuild the economy, and the driving force of economic growth will be the Next Generation EU Recovery Fund. Speaking of the Recovery Fund, President von der Leyen assured that thanks to the unique model of the social market economy, the EU can achieve stability and prosperity.

The first part of the speech was dedicated to strengthening the EU’s activity in the field of health. The President referred to the introduction of export restrictions on medical goods and breaks in supply chains during the pandemic and stressed that it was cooperation with European industry that allowed us to ensure the right amounts of strategic goods. In this regard, von der Leyen considered it crucial to build a stronger health union and supported the European Parliament’s demands to increase health spending in the future Multiannual Financial Framework (hereinafter referred to as “MFF”). Among the President’s proposals, there were, among others, the postulate of making strategic reserves. The Union of Entrepreneurs and Employers supports initiatives aimed at strengthening the EU’s economic position and independence vis-à-vis partners from other parts of the world. However, we believe that one should be cautious about expanding EU competences and that expansions as such should only take place where action at the EU level brings added value.

The second subject to be addressed was related to jobs and workers’ social rights. The President of the EC recalled the creation of the SURE programme, under which EUR 100 billion will be allocated to national short-term work programmes and similar measures to protect jobs, employees and the self-employed from the risk of dismissal and loss of income. Furthermore, Ursula von der Leyen called for “dignity of work” to be ensured by establishing a European minimum wage. Importantly, the President decidedly emphasised that she was a supporter of collective bargaining systems and that all European solutions would respect national traditions. In our view, to support entrepreneurs during the pandemic is necessary and beneficial. Nevertheless, the Union of Entrepreneurs and Employers has consistently opposed the idea of introducing a European minimum wage. We believe that the minimum wage – if at all – should be regulated on a regional, not national, and certainly not a European level. In our previous studies, we also questioned the EU’s competences in this area.

The economy and the common market were the third issue raised by the President of the EC in this year’s address to the European Parliament. Following a 12% fall in EU GDP in the second quarter of this year, the time has come for a rebound, but the economies of the member states still need support, said Ursula von der Leyen. The Recovery Fund will be of key importance in this process, as will also be the strengthening of the EU internal market. “We must tear down the barriers of the single market. We must cut red tape. (…) And we must restore the four freedoms – in full and as fast as possible,” said the President of the EC and added: “We will work with Parliament and member states to bring this high up our political agenda and we will propose a new strategy for the future of Schengen.” Then, von der Leyen announced an update of the industry strategy and a reform of the competition framework. In our opinion, support for enterprises in a crisis is needed, but in the long run, a good regulatory environment is the most important factor for business performance. The Union of Entrepreneurs and Employers has consistently emphasised that in order to maintain the competitiveness of European enterprises, the EU should focus on reducing red tape and administrative burdens, especially for SMEs. Therefore, we welcome the declaration of the President of the EC and stress that any new EU strategies – be they on industry, climate protection or digitisation – must be accompanied by a regulatory policy aimed at improving the business environment in the EU.

Ursula von der Leyen devoted the next part of her speech to the fight against climate change. By announcing an increase in the target of reducing carbon dioxide emissions from 40% up to 55% by 2030, the President said that she “recognised that this increase from 40 to 55 was too much for some, and not enough for others”. She also added that the climate strategy must go far beyond reducing emissions. Among the initiatives that will be financed from the Recovery Fund, she mentioned, among others, investments in hydrogen and the renovation of buildings that consume excessive energy. In the opinion of the Union of Entrepreneurs and Employers, the European Green Deal (hereinafter referred to as “EGD”) is a reality to which the Polish economy will have to adapt. Obviously, this will require efforts both on the part of the regulator and on the part of market participants. It is also evident that some member states are better prepared for the green transition than others. Therefore, increasing climate goals from the Polish perspective may entail certain threats. At this stage, it is important that President von der Leyen’s declaration of understanding is reflected in the strategy of the EC. Additionally, as von der Leyen herself pointed out, the European economy needs deregulation and the strengthening of the internal market. Henceforth, the Union of Entrepreneurs and Employers calls the Commission to remember about maintaining the competitiveness of European industry when designing the assumptions and requirements of the EGD.

The last point analysed in this commentary touches upon digitisation. “We must make this Europe’s digital decade,” announced the President of the EC. To do so, she proposed various initiatives, including building a European cloud, regulating artificial intelligence, creating a European e-identity, developing infrastructure, fighting digital exclusion, and investing in supercomputers. Undoubtedly, the EU needs to step up its efforts to develop digital technology if it is to maintain a prominent position in a changing world. Understanding the need to create regulations that provide European consumers with an appropriate level of security, the Union of Entrepreneurs and Employers draws attention to the risks that may arise from over-regulation of the digital market. This is especially apparent in the case of artificial intelligence. There currently is a debate whether to extend its definition to automated decision-making processes that are harmless from the point of view of individual rights, and at the same time to cover these processes with potential EU regulation of artificial intelligence. If this scenario does take place, then companies using low-risk technologies will face a disproportionate regulatory burden, which will have a negative impact on their competitiveness. Concurrently, by creating one regulation, we risk that technologies that carry the risk of violation of fundamental rights, such as, for example, remote biometric identification, will be subject to standards that are too low. At this point, the Union of Entrepreneurs and Employers once again calls for maintaining an appropriate balance between the protection of individual rights and the creation of an appropriate regulatory environment for entrepreneurship. Interventionism that is too far-reaching will not allow the European economy to achieve competitiveness and develop and will thus threaten the recovery of the EU’s global position.

The State of the Union Address touched upon key issues that will shape our reality in the years to come. The fact that the President of the European Commission, Ursula von der Leyen, noticed the problems of the internal market and proposed the creation of a new strategy for the Schengen Area, which will undoubtedly improve the quality of the regulatory environment for entrepreneurs, should be assessed positively. Nevertheless, the introduction of a European minimum wage or the excessively rapid increase in climate goals may adversely affect the condition of the Polish economy and the competitiveness of European industry. With this in mind, the Union of Entrepreneurs and Employers reminds that the improvement of the global position of the European Union will not take place without an increase in its economic importance.

The State of the Union Address touched upon extremely important issues that will shape our reality in the years to come. The fact that the President of the European Commission, Ursula von der Leyen, noticed the problems of the internal market and proposed the creation of a new strategy for the future of the Schengen Area, which will undoubtedly translate into an improvement in the regulatory environment for European entrepreneurs, should be assessed positively. Equally positive is the importance that von der Leyen placed on developing technology and improving the EU’s strategic resources. However, we are concerned about some of the proposals. The introduction of the European minimum wage or the excessively rapid increase in the EGD climate goals may adversely affect the condition of the Polish economy, as well as the competitiveness of European industry. With this in mind, the Union of Entrepreneurs and Employers reminds that the improvement of the global position of the European Union will not take place without an increase in its economic importance.

 

19.09.2020 Commentary of the Union of Entrepreneurs and Employers on Ursula von der Leyen’s State of the Union Address

 

Fot. GregMontani/pixabay.com

Warsaw, 10^th August 2020

 

Opinion of the Union of Entrepreneurs and Employers regarding the presented proposals for regulatory changes in the field of development of renewable sources in Poland

 

We would like to begin with emphasis on the immediate need to adapt legislation in this area both to the European climate neutrality policy and to the situation the energy sector related to the pandemic.

We consider all actions aimed at increasing the supply of green energy to be appropriate and necessary – not only in connection with EU obligations, but also due to the needs of Polish industry.

In this regard, we assess the proposed changes very positively. The document presented by the Ministry of Climate concerning the amendment of the ‘act on renewable energy sources and certain other acts’ approaches the issues related to the development of this sector of energy in a comprehensive and coherent manner, changing the provisions in the entire scope related to the investment and operational process of renewable energy sources in the future. The authors of the draft noticed the need for changes not only in the Renewable Sources Act, but also in the Energy Law and the Spatial Development Act. Only this approach creates proper foundations for the development of distributed energy.

The proposed changes may have a decisive impact on the development of widely understood distributed energy, as their scope covers small and medium-sized enterprises, i.e. the most dynamic sector of the Polish economy. The act increases the power parity for entrepreneurs with regard to their own renewable installations.

A rapid increase in investment opportunities in the field of renewable installations by clearly defining the concept of “small RES installation” gives the SME sector an opportunity to boost competitiveness as well as a certain energy independence, so needed in rural areas in particular.

The selection of the size of such an installation in the range of 50–500 kW should also be considered quite apt, as this is the range of averaged power consumption in the sector of small and medium-sized enterprises, as well as medium-sized farms. In the project, we did not find a description of a small installation on a farm, henceforth we ask: do the figures shown above also apply to farms?

The proposed changes are aimed at creating a predictable framework for the development of the renewable sector, extending by law the support systems for individual technologies by 5 years. At the same time, the act emphasises the function of the auction system as a guarantor for financing institutions, recognising this support system as the cheapest and the most effective in Polish economic conditions.

The act also mitigates the problems of investors who, due to the pandemic, will exceed the maximum time limit for producing or selling electricity for the first time. It is also a very good decision, all the more so, as it minimises the bureaucratic process, without too much involvement of the Energy Regulatory Office. The form of declarations when submitting applications for extending the deadline is very accurate in this case.

We fully support the form of reducing bureaucracy in the entire registration process of energy producers from RES proposed in the Act, and thus reducing administrative burdens for the Energy Regulatory Office.

Amendments to the Spatial Planning Act, enabling in practice the rapid development of photovoltaics, constitute another much anticipated initiative, as a result of which, within a few years, there may be a significant increase in the supply of green energy and the stabilisation of the ends of transmission lines.

We are convinced that the entry into force of the act in the proposed form will stimulate the development of renewable energy sources, which must in turn stabilise energy prices for end users. The proposed amendments certainly meet the social demand, securing important solutions for energy producers from RES and for the industry related to investments in RES in its entirety.

However, some controversy is raised by the proposed form of regulation regarding the definition of installed capacity. Although a certain compromise has been reached here with circles in the RES community, which can be considered rational and promising for the development of RES in Poland, we suggest that the definition be refined in the future in such a way that it allows for some flexibility in extracting power from RES installations, especially when modernising such installations.

When assessing positively the proposed legislative changes regarding renewable energy sources, we would like to remind all parties involved that there is an urgent need for further work in this direction.

Unblocking investment opportunities in onshore wind energy by amending the provisions of the so-called “distance act” is the most important legislative task for the legislator today. We would like to remind them once again that onshore wind energy nowadays is the cheapest source of electricity, the development of which has been impeded by the provisions of the act.

Rapid adoption of all legislative acts enabling investments in offshore wind energy is yet another urgent need, because such investments will stabilise the country’s entire energy system.

We also like to remind everyone interested of the need for rapid legislative work in the area of grids and connections allowing for the development of distributed energy.

 

11.08.2020 Opinion of the Union of Entrepreneurs and Employers regarding the presented proposals for regulatory changes in the field of development of renewable sources in Poland

 

Fot. Appolinary Kalashnikova / Unsplash.com

Warsaw, 18^th August 2020

 

Appeal of the Union of Entrepreneurs and Employers
regarding the pay rises of persons holding public office

 

The Union of Entrepreneurs and Employers believes that increasing the salaries of persons performing public functions serves the public interest. The imbalance between the remuneration received and the scale of responsibility is particularly visible in the case of deputy ministers. With this in mind, we appeal to the members of the Sejm of the Republic of Poland (Parliament’s lower house) not to succumb to populist pressure and to reject the veto of the Senate (Parliament’s upper house) regarding the draft act increasing the salaries of people holding public office, and then to immediately amend that act, correcting some of the errors within. Above all else, we draw attention to the need to clearly link the salaries of politicians with the average salary in the national economy, to withdraw from the increase in subsidies for political parties, and to adopt an even greater salary increase for the most important people in the country, i.e. the President and the Prime Minister.

There is no doubt that all of us should care about high-quality public services. One of the basic instruments to achieve the goals of public or private organisations is to have appropriate, competent staff with knowledge, skills, and experience.

Independent market data and expert opinions indicate two phenomena. First, there is a pay gap in the salaries of senior public officials relative to senior management and experts in the private sector. Secondly, the scale of responsibility and the significance of decisions made, the complexity of tasks, the scope of management, the necessary experience, knowledge or the need to ensure financial independence, situate the positions of high officials in the public sector above the level of top managers and experts in the private sector. To sum up, despite the higher importance of positions, people employed in public administration earn several times less than managers in large companies.

The above phenomenon leads to a negative selection of staff in the broadly understood public sector. The low level of remuneration for public sector employees makes it difficult in the long term to keep people with adequate or above-expectations competencies in this sector. Taking the aforementioned into account, it is necessary to ensure such a level of their remuneration that will keep these people working in public administration.

Moreover, the current situation is actually disrupting the natural separation of powers due to the increasingly frequent phenomenon of combining the functions of members of the Council of Ministers and secretaries of state with the function of a member of the parliament. This way, the salary combined from the function performed is supplemented by the remuneration obtained as MP. There is no doubt that this is not a desirable condition – increasing salaries for ministers and deputy ministers would allow limiting (if not completely eliminating) this practice.

At the same time, elective officials should also have a sustained level of remuneration that allows them to maintain their current and future financial independence from decisions made in the exercise of power. We would like to emphasise that the amount earmarked for pay rises for persons performing public functions in the state would be marginal from the point of view of the state budget. Concurrently, it would be an investment in the quality of the administration.

However, the introduced salary increases cannot be the only tool and effect of the amendment. The reform of the wage policy in the public sector should be a reform of the entire remuneration system.

As part of the necessary changes, we postulate to:

1. restore the level of an MP’s salary to the level prior to its 2018 reduction,
2. increase the remuneration of persons indicated in the draft act amending certain acts on remuneration of persons holding public office and amending the act on political parties (Druk/Print 551) to a level directly dependent on the national average,
3. introduce a system of supervision over money spent within public budgets and create instruments conducive to the efficiency of their spending,
4. limit the number of officials in both senior and junior positions.

In the context of the last postulate, low efficiency of activities is noticeable in relation to the scale of employment in public administration. It is a common phenomenon in every democratic system. So is the growth of bureaucracy, which was already noticed at the dawn of modern systems of public administration. Considering the above, the Union of Entrepreneurs and Employers recommends a significant reduction in the number of jobs in the Polish public sector. The first review should be performed after the COVID-19 crisis, and the consequent ones be carried out periodically, e.g. every 4 years. At the same time, the Union is of the opinion that along with the decrease in the level of employment, the salary budget in the public sector should be maintained, so that within the available funds, it is possible to grant an increase in the level of salaries to rank-and-file officials kept in the sector.

Simultaneously, the Union is critical of plans to increase the level of subsidies for political parties which was included in the draft act amending certain acts on remuneration of persons holding public office and amending the act on political parties (Druk/Print 551). Apart from general doubts as to the legitimacy of financing political parties from the budget, the resources at their disposal at the moment seem to be completely sufficient.

We would like to note that there is an argument among the critics of the plans to raise the salaries of persons holding public functions in terms of the wrong timing of the introduction of the change (the COVID-19 crisis). We wish to stress that there never is and will never be a good time to introduce changes of the proposed nature. When a few years ago, the government awarded prizes to high officials during an economic boom, populist slogans about limiting wages in the public sector were as omnipresent as they are today.

We call for a long-term perspective of decision-makers’ thinking about the quality of public administration and to not succumb to populist tendencies in this area.

 

18.08.2020 Appeal of the Union of Entrepreneurs and Employers regarding the pay rises of persons holding public office

 

Fot. nattanan23/pixabay.com

Warsaw, 13^th August 2020

 

The Union of Entrepreneurs and Employers consistently criticises
the idea and the implementation procedures of the sugar tax

 

The Union of Entrepreneurs and Employers consistently opposes the introduction of the sugar tax in Poland. At the same time, the Union expresses its objection to how the amendment to the non-enforced act on the promotion of healthy consumer choices is being handled.

The Union would like to point out that any sectoral levies, including the sugar tax, are unacceptable, as they violate the principle of universality of taxation. It is impossible to accept an arbitrary imposition of additional tax burdens on a chosen sector of the economy, especially considering the specific times we have found ourselves in. The economic shock caused by the coronavirus pandemic has posed a number of challenges for entrepreneurs who operate in conditions of reduced demand and extreme uncertainty. At the same time, the beverage industry, at which the sugar tax is mainly aimed, recorded very serious losses resulting from a drop in turnover of several dozen percent. Therefore, increasing levies on this industry is all the more unjustified and incomprehensible.

As for the impact of the sugar tax, it is impossible in an analysis not to refer to the procedure according to which amendments to the act containing it are processed. The works on the legal act under which the sugar tax will have been enforced have not yet been completed. The draft act has not yet been passed nor signed by the president. There are, however, amendments to this law that is not yet legally binding. Entries postposing the date of entry into force of the sugar tax from 1^st July 2020 to 1^st January 2021 have been hidden among the solutions contained in the act amending certain acts to ensure the functioning of the healthcare system in connection with the COVID-19 epidemic and afterwards. The possibility of amending a non-enforced act certainly had not been envisioned in the draft act procedure provided for in Art. 119 of the Constitution of the Republic of Poland. Unfortunately, the legal flaws of this amendment do not end there.

According to the information provided on the official website of the Polish Parliament, the draft act aims to introduce further instruments in the field of healthcare that will allow for an effective fight against COVID-19 – therefore, the sugar tax is completely unrelated to its objective. There is no doubt that this way of proceeding with amendments is contrary to the rules of legislation. These activities also lead to a situation in which entrepreneurs are deprived of any certainty as to the regulatory environment of their operations.

Bearing in mind all the above issues, the Union of Entrepreneurs and Employers maintains its position, according to which the sugar tax should not become part of the Polish legal system. This sectoral tax will primarily hit the sector of the economy that has suffered hard from the crisis caused by the pandemic. Such behaviour on the part of legislators is therefore devoid of any rational premises. We also believe that the introduction of the sugar tax will be burdened with a very serious legal flaw, and that it undermines the entrepreneurs’ right to legal certainty.

 

13.08.2020 The Union of Entrepreneurs and Employers consistently criticises the idea and the implementation procedures of the sugar tax

 

Warsaw, 28^th July 2020

THE SUMMIT OF THE EUROPEAN COUNCIL AND ITS AFTERMATH
OPINION OF THE UNION’S CHIEF EXPERTS ON POLITICAL ECONOMY

Following the last summit of the European Council (comprising of leaders of EU member states) and the decision made to establish a reconstruction fund and to create the Next Generation EU programme, the talks of a Hamiltonian moment in Europe began. Let us recall: Alexander Hamilton created the American central bank and his actions made it possible to incur federal debt in place of state debt. This facilitated the country’s reconstruction after the War of Independence, and also lowered the cost of debt as well as made it easier for the states to pay it back. Moreover, the foundation of the emerging republic had been built in this way. Regional interests, thus far often divergent, became unified – and the federal government became the cornerstone of the emerging state. This Hamiltonian moment was a turning point: the restructuring of state debts was one of the key moments in the history of integration of American states. This is what is supposed to take now place in Europe. According to many commentators, the new draft budget, in particular provisions enabling financing of reconstruction funds, is to be such a Hamilton moment.

The concept of such a moment as a turning point, a crossroads in the history of the republic was formulated by J.G.A. Pocock almost half a century ago. He dealt with the Machiavelli moment – the situation when a modern republic (Florence in this case) faces the risk of collapse which, provided people have been made aware, leads to a policy reconfiguration necessary for it to survive. This is the moment when, as Pocock wrote, the republic stands at a crossroads and tries to salvage “political and ethical stability in the rush of irrational events perceived as completely destructive to all systems of secular equilibrium”. This is the moment when republican virtue confronts chance and corruption. Of key importance at this point is the change of political philosophy – because Machiavelli’s moment is a time when the hitherto experiences and knowledge of politics become no longer relevant. Machiavelli understood and recorded this experience in his masterpiece “The Prince”, henceforth Machiavelli’s moment. On the other hand, “The Prince” somehow reflects the process of reconfiguration of political philosophy and politics in Florence.

Such turning points repeatedly take place when a republic founded on secularised Western philosophy is on the verge of collapse. This was the case in 16^th century England and 18^th century North America. In case of the latter, it was James Maddison who played the role of Machiavelli, finally conceptualising American federalism and paving the way for the US constitution. The durability of the American republic was thus ensured by Hamilton and Maddison. The Machiavelli moment and the Hamiltonian moment secured the survival and development of the American republic.

In recent years, the EU has faced such a Hamiltonian moment, as many commentators are pointing out. But more importantly, it might actually be a Machiavelli moment already. The dispute-war waged by leaders at the last summit, post-Brexit, after the Eurozone crisis, and now in the midst of an economic storm sparked by the coronavirus epidemic, although it may appear to be a debate regarding the present, could be a moment of confrontation between republican virtues and corruption. The Union must find a firm foundation for its existence. European federalists are looking forward to that common debt becoming such a foundation. Maybe… if it in fact improves the situation of southern European countries. Maybe… although the issue of debt itself is not answer to the question of need for a new political philosophy of the Union.

It is still uncertain whether the EU has retained the vitality of the European republic or has already become an irreversible administrative behemoth where procedure prevails over virtue. Recent crises have made it possible to rethink and reconsider the concept of community. For the time being, they have been replaced by a dispute between the frugal faction – countries that are net contributors to the European project, and those usually described as spendthrift – the European south.

This is a dispute that reaches the very heart of the European project. For it is about who benefits more from the single currency and who benefits from the de facto status of a European tax haven. Although everyone benefited from the Euro, the distribution of benefits was asymmetrical. The countries of the European North benefitted more. By contrast, tax havens such as the Netherlands and Ireland benefit from artificial profit transfers. Undermining European solutions, they care above all else about their particular national interests. In the Netherlands, as much as 40% of CIT revenues are the result of profits transferred there artificially. The stable fiscal situation of countries such as the Netherlands may therefore be related to the asymmetry of benefits in the EU and the preference for national interests pursued through EU mechanisms. Although such a strategy is understandable and very beneficial in particular terms as the examples of the Netherlands, Ireland or Luxembourg show, it may sabotage the foundations of a European consensus.

At the EU summit, an agreement was reached, because the frugal countries gave way, but at the cost of significant concessions in their favour. They are especially visible in the case of the Netherlands – which, apart from the reduction of the budget contribution, gained in the near term higher remuneration for handling European customs duties. They are among the victors of this summit – from a pragmatic and competitive point of view. But is this a republican approach?

Nevertheless, the problem of the European Union is not the dissatisfied attitude of the thriving economies for which the EU and the common market bring almost nothing but benefits. The problem consists in the increasing headaches of the southern countries, exacerbated even more by the current crisis. The countries of the European south have been developing very slowly for over a decade. Greece still (in 2019, according to the World Bank) achieved the same level of development (measured by GDP per capita) as 2 decades ago, and the same goes for Italy. The Spanish economy grew by just over a dozen percent over that time. Let us compare: the German economy has grown by 30% since 2000, whereas the Polish economy by 100%. The post-pandemic crisis is likely to aggravate these disparities even further. Therefore, the Machiavelli moment should be a moment to re-formulate the European concept, but also a period of real, long-term development aid for the South – a bit like the Mediterranean countries obtained in the 1980s. Today, without aid or in a situation where control and distribution mechanisms included in the European budget and aid programs will drastically limit access to it, the political drift of the Union may become more and more dangerous to its existence.

This moment might be a turning point in the history of a republic. A moment of historical significance when fate can go two ways – it will either drift towards a crisis, or new concepts and ideas will restore its vitality. This moment in EU’s recent history has lasted for several years, and the last summit is just yet another contribution to a longer process whose consequences are still not obvious. The summit of the European Council can be treated as a moderate success of the Polish government. It is also a moderate success for European federalists – although there is still a long walk ahead of us until we reach a Hamiltonian moment. Yet – so it would seem – the Machiavelli moment will determine the future of the Union. Either the idea of a republic will ensure its longevity, or divergent national interests along with an excessive bureaucracy will keep the drift unchanged. The right answer in this increasingly complicated reality would be a common commitment together with an idea how to make use of it for the good of the republic.

Piotr Koryś Ph.D.
Chief Expert of Economic Policy of the Union of Entrepreneurs and Employers

 

28.07.2020 The Summit of the European Council and its aftermath – the opinion of the Union’s Chief Expert of Economic Policy

 

Fot. hpgruesen / pixabay.com

Warsaw, 6^th July 2020

THE CONDITION OF THE POLISH MINING INDUSTRY
THE OPINION OF THE CHIEF EXPERT OF THE UNION OF ENTREPRENEURS AND EMPLOYERS ON ENERGY

The data on the condition of the Polish mining industry, presented to the members of the Social Dialogue Council’s Economic Policy and Labour Market Team, show the current situation in the hard coal mining sector in Poland does not inspire optimism and indicates the necessity to undertake quick stabilising measures, and most importantly, to develop the Plan for Restructuring the Polish Mining Industry, a reasonable, reliable plan that takes into account the specificity of the Polish mining industry and the Polish energy sector. Such a Plan should be consistent with the Energy Transition Strategy and ought to take into account the gradual phasing out of fossil fuels with the 2050 time horizon.

The plan for the Polish mining industry should take into account the European Green Deal Policy, which does not mean the liquidation of the sector by 2050. In 2019, the Union of Entrepreneurs and Employers presented a report entitled “Assumptions for the Energy Development Strategy in Poland”, which presented the place of Polish coal until 2050.

In the near future, we will present the necessary update to this report in which we will try to define more precisely both the place and role of domestic hard coal and lignite resources by 2050. Meanwhile, the presented data show clearly unfavourable trends in the Polish mining industry, on the basis of which it can be predicted in the coming years.

The decrease in sales by an average of 17% and an increase in stocks by 13% is not yet the main concern for the mining sector, but the decrease in production by 7% and the decrease in labour productivity in mines constitute serious problems not only for the mining industry.

This means that it is more and more difficult to extract coal in Polish mines, and thus the costs of this extraction are clearly growing. The fluctuations in thermal coal prices are understandable, but the phenomenon of a 30% drop in coking coal prices indicates a tendency in this matter. This may be related to the decline in steel production in the world, but nevertheless, this issue requires a detailed analysis and inclusion in sectoral plans. According to the report, in 2020 over 82,000 people worked in the mining industry, which means that the employment level has not changed for several years.

On the other hand, there was a significant increase in investment outlays, and so in 2019 they amounted to over PLN 4 billion, and by 30^th April 2020 over PLN 1.2 billion was invested in the mining industry.

It can be assumed that 30% of these amounts are investments in mining-related companies, not included in the report. Considering the above, the annual level of investment in the Polish mining industry certainly exceeds PLN 5 billion, and yet the level of extraction and labour productivity are declining.

If one adds to this the amount of the budget subsidy of PLN 1 billion per year and the mining sector’s liabilities of PLN 15 billion, the conclusions regarding the state of this sector are obvious.

However, this does not mean there is neither room nor role for the hard coal sector in the Polish economy until 2050. It is true that coal will be replaced by renewables and natural gas, but for many years to come, coal will be the basic raw material for the Polish energy sector.

To sum up, immediate action should be undertaken within the Polish mining sector:

• Making an inventory of Polish mines in terms of their future, opportunities, economy, seam depth and employment.
• Defining the volume of domestic production (e.g. 25 million tons) as a reserve to secure the country’s energy demand.
• Redirecting investment outlays to mines selected for further extraction.
• Developing a co-operation system for coal-fired energy with renewable and gas sources in the timeline until 2050.
• Carrying out a market analysis for black energy, sales areas, prices, volume of black energy supplies in individual years until 2050.
• Simulating the cost of mine closures, along with the cost of mining pensions until 2050.

Only immediate and consistent actions presented above can stop the degradation of the Polish mining industry and open its new chapter, taking into account the European energy policy and the specificity of the Polish energy sector.

If the transformational activities in the mining sector do not begin immediately, we are concerned that the situation will force the development of such events that are very unfavourable for the mining industry.

Włodzimierz Ehrenhalt
The Union of Entrepreneurs and Employers’ Chief Energy Expert

06.07.2020 The condition of the Polish mining industry – the opinion of the chief expert of the Union of Entrepreneurs and Employers on energy

 

Fot. Tama 66 / pixabay.com

Warsaw, 16^th June 2020

Two representatives of the Union of Entrepreneurs and Employers among the proposed candidates for the European Economic and Social Committee

The Ministry of Family, Labour and Social Policy informed that Marcin Nowacki and Tomasz Wróblewski, representatives of the Union of Entrepreneurs and Employers, were nominated to the Secretariat of the EU Council as candidates for members of the European Economic and Social Committee for the 2020-2025 term.

For the first time, the government did not bow to the dictates of the post-communist majority on the side of employers at the Social Dialogue Committee. Apart from the Union of Entrepreneurs and Employers, the post-communist organisations indicated 7 of their candidates out of the 7 seats in the EESC as agreed by the “majority”. The Union of Entrepreneurs and Employers nominated two of its candidates separately, Tomasz Wróblewski and Marcin Nowacki.

In the course of the selection procedure of candidates for members of the European Economic and Social Committee for the 2020-2025 term, the government selected two candidates from the Union of Entrepreneurs and Employers and five from the post-communist majority. Among the rejected candidates, there was Mr. Andrzej Malinowski, President of Employers of the Republic of Poland. In January 2020, in the Do Rzeczy weekly, an article about the cooperation of Andrzej Malinowski, President of the Employers of Poland, with the military intelligence of the People’s Republic of Poland. The weekly paper also published scans of the commitment to cooperate, including some bearing Malinowski’s signature, and other documents signed or prepared by him.

Since September 2017, the Union of Entrepreneurs and Employers has been actively running its Representation to the European Union. The office in Brussels focuses on representing the interests of Polish enterprises. It deals with general matters relating to all companies and works with the industries represented in the Union of Entrepreneurs and Employers. The Delegation is responsible for maintaining a permanent relationship with the most important EU institutions and economic stakeholders. One of the key areas of the international activity of the Union is also integration and undertaking joint activity with other employers’ organisations from the region of Central and Eastern Europe.

Marcin Nowacki and Tomasz Wróblewski will constitute a proper and worthy representation of the Republic of Poland on the international arena in the European Economic and Social Committee.

The full list of candidates for members of the European Economic and Social Committee for the 2020-2025 term is as follows:

1. Mr Jacek Piotr KRAWCZYK – Lewiatan Confederation
2. Mr Lech PILAWSKI – Lewiatan Confederation
3. Mr Janusz PIETKIEWICZ – Employers of the Republic of Poland
4. Mr Krzysztof OSTROWSKI – Business Centre Club – Employers Association
5. Mr Jan KLIMEK – Polish Craftsmanship Association
6. Mr Marcin NOWACKI – Union of Entrepreneurs and Employers
7. Mr Tomasz WRÓBLEWSKI – Union of Entrepreneurs and Employers
8. Mrs Dorota GARDIAS – Trades Union Forum
9. Mr Rafał JANKOWSKI – Trades Union Forum
10. Mr Tadeusz MAJCHROWICZ – Independent Self-governing Trade Union “Solidarity”
11. Mr Mateusz SZYMAŃSKI – Independent Self-governing Trade Union “Solidarity”
12. Mr Marcin ZIELENIECKI – Independent Self-governing Trade Union “Solidarity”
13. Mr Wincenty Sławomir BRONIARZ – All-Poland Alliance of Trade Unions
14. Mr Dariusz POTYRAŁA – All-Poland Alliance of Trade Unions
15. Mr Krzysztof Stanisław BALON – Working Community of Associations of Social Organisations WRZOS
16. Mrs Małgorzata Anna BOGUSZ – The Kulski Foundation
17. Mr Maciej Dawid KUNYSZ –EKOSKOP Association
18. Mrs Justyna Kalina OCHĘDZAN – Greater Polish Coordination Council – Union of NGOs
19. Mr Krzysztof Jerzy PATER – Polish Scouting Association
20. Mr Marcin Seweryn PLUTA – Sensible Poles Association Initiative
21. Mr Tymoteusz Adam ZYCH – Polish Non-Governmental Initiatives Confederacy

 

Fot. GregMontani/pixabay.com

Warsaw, 20^th July 2020

Union of Entrepreneurs and Employers:
the final beneficiaries of the ERP system must be the citizens and the environment

The deadline for Poland to introduce the provisions of the European Directive implementing Extended Producer Responsibility (ERP) has passed on 5^th July, and we have less than three years to amend the current system. The Union of Entrepreneurs and Employers hereby presents its proposal regarding the ERP system, taking into account the demands of entrepreneurs and organisations representing waste management companies.

In the face of the necessity to introduce Extended Producer Responsibility into Polish legislation, Poland has a chance to heal the waste management system and eliminate current abnormalities. The purpose of improving the ERP system is to increase the efficiency of collection, preparation for recycling and the recycling of packaging waste itself, so as to achieve higher levels of recycling specified in EU law, and thus restore valuable material to the economy and protect the environment.

The vestigial ERP system currently in force in Poland, based only on the obligation to meet the recycling levels without being linked to the economy of achieving these goals, does not meet the basic EU requirements. The Union of Entrepreneurs and Employers and the Working Group for Extended Producer Responsibility operating within its framework, in which organisations representing producers of packaging products (including food, pharmaceutical, cosmetic or detergent industries) and organisations representing waste management companies participate, presented postulates and proposals of entrepreneurs regarding the improvement of this system, in accordance with the requirements contained in Article 8a of the waste directive.

According to the Union, the ERP model should meet the following criteria:

• The system must be simple and comply with the directive and in particular with Article 8a;
• The final beneficiaries of the system should be the citizens and the environment (therefore, ERP Organizations, among others, should operate in the not-for-profit formula);
• The responsibility of system participants should be adjusted to the scope in which they can bring the greatest added value; moreover, the responsibility should go along with the possibility of actually exerting an impact on efficiency in the area covered by this responsibility;
• The ERP system should maximise the use of synergies between the activities of individual system participants;
• The system must be cost-effective along the entire value chain (money follows waste).

When thinking about creating an ERP system, one should bear in mind, in addition to environmental goals, the cost-effectiveness of the entire chain.

“As part of the public debate, many ERP models are proposed, including the extremely ineffective model based on a centrally determined fee (para-tax) and its arbitrary redistribution,” emphasises Marcin Nowacki, the Union’s vice-president. “Therefore, the Union of Employers and Employees proposes that all the minimum requirements contained in Art. 8a be included in the Polish act, as only a properly implemented ERP system will ensure the achievement of environmental objectives while maintaining economic efficiency among all its participants,” he adds.

The model proposed by the Union of Entrepreneurs and Employers is based on the synergy of activities between all stakeholders, from the Regulator and communes, to producers of packaged products and ERP Organisations, licensed by the Regulator and operating in the not-for-profit formula.

The tasks of the Regulator would include control and supervisory functions, primarily in the area of waste management costs, as well as ensuring the transparency of the system and implementing supervision, audit, and control systems. The Regulator should be a government administration body reporting directly to the Minister of the Environment. The tasks of a commune (gmina – subdivision of a poviat) as a public participant in the system would include cooperation with ERP Organisations – local governments, in consultation with them, would introduce the standardisation of selective collection and coordinate educational and information activities. Local governments would also participate in organising joint tenders for the collection of packaging waste.

Producers would pay fees to the ERP Organisation in accordance with the applicable rates and report the number of packages placed on the market broken down into individual streams (households and businesses).

Other not-for-profit ERP Organisations licensed by the Regulator would take over the obligations from producers and cover the costs of the packaging waste management system from households, but also fulfil recycling obligations regarding the entire stream of packaging, also collective and transport packaging. ERP Organisations would establish, under the supervision of the Regulator, ERP rates for packaging producers reflecting the actual net cost of collection and management of packaging waste.

An important role in the model designed by the Union of Entrepreneurs and Employers would also be played by the National Fund for Environmental Protection and Water Management, which would have a special fund supplied by ERP Organisations, used for research and development in the field of eco-design or recycling.

The members of the Union of Entrepreneurs and Employers wish to introduce the Extended Producer Responsibility in Poland primarily in order to meet environmental goals. The fees paid by producers should be an incentive to introduce recyclable packaging. On the other hand, the funds obtained from them should be allocated to the processing of waste into a secondary raw material of appropriate quality suitable for reuse.

The model proposed by the members of the Union of Entrepreneurs and Employers also guarantees transparency and cost-effectiveness for all participants of the system. To achieve this, producer fees cannot be imposed arbitrarily in isolation from environmental and market realities, as this will create inefficiencies for which the citizen will ultimately pay (as a resident and a consumer).

 

Fot. Jonathan Chng / Unsplash.com

Warsaw, 26^th June 2020

 

Appeal of the Union of Entrepreneurs and Employers to the government: cover the whole catering industry with a uniform 8% VAT rate

 

There can be no doubt that food catering industry is one of the sectors hit hardest by the coronavirus pandemic. The industry has basically been shut down as a result of the restrictions put in place to fight the virus. Some of the restaurants did not survive this difficult period, for others the fight is only just beginning – they are still on the market, but their turnover is much lower than a few months ago.

“The[se] companies were significantly helped by means of the financial shield offered by the Polish Development Fund Group, enabling them to survive the period when they were in fact not earning at all,” said Cezary Kaźmierczak, the president of the Union of Entrepreneurs and Employers. “The problems did not end when the restaurants opened though: their profitability is currently limited by both reduced demand and the need to incur costs to adapt to higher sanitary standards,” he adds.

The contribution of the food catering industry to Polish GDP is approx. PLN 37 billion, and the market is dominated by micro and small entrepreneurs. The industry employs nearly a million people, mainly youth. Over the last few years, we have noticed a clear upward trend in the restaurant market.

“Despite successive regulations reducing the profitability of the food catering business, restaurants were doing increasingly better,” said Zbigniew Kmieć, the Union of Entrepreneurs and Employers’ Chief Agriculture and Food Expert. “Poles were becoming more affluent and thus began to eat out more often, which had a direct impact on the development of this market,” he concluded.

Due to the repercussions of the coronavirus pandemic, there is a enormous risk of not only breaking this trend, but even of a collapsing of the catering market in Poland. Entrepreneurs from the industry are pessimistic about the prospects for the industry in the short term, stressing that they may be forced to make the most difficult decisions, including those about closing down for good.

Considering the difficult situation, a number of countries have decided to apply a uniform, low VAT rate for this sector. These countries include Germany, Greece and Bulgaria, while Romania is considering applying a 0% rate for the food catering industry.

“We should also make such a decision in Poland,” emphasises Cezary Kaźmierczak.

It is worth noting that, according to the new VAT matrix, catering services are, in principle, already subject to the 8% rate. Unfortunately, there are a number of exceptions to this rule.

“The regular, higher rate applies to, among others, serving non-alcoholic and alcoholic beverages or seafood dishes,” adds Jakub Bińkowski, director of the Law and Legislation Department of the Union of Entrepreneurs and Employers. “Due to the structure of the revenues of restaurants and similar businesses, but also the logic of the system, it would be reasonable to cover the entire sector with a uniform 8% rate without any exceptions.”

The experts of the Union of Entrepreneurs and Employers stress the unique nature of catering services and how labour intensive it is. Introducing a single, low VAT rate on everything in this industry would increase the profitability of restaurants. The additional profit would partially return to the State Treasury as part of the income tax, and it could also be used to repay subsidies granted by Polish Development Fund Group.

25.06.2020 Report by the Union of Entrepreneurs and Employers: Let’s save Polish restaurants

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